Contractors all risk
Contractors All Risk (CAR) insurance is a comprehensive policy designed to cover construction projects against a wide range of risks during the course of construction. It protects the interests of contractors, subcontractors, and often project owners.
CAR insurance provides cover for physical loss or damage to a building or civil engineering works while under construction. It also includes third-party liability cover for injury or property damage caused to others due to the construction activities.
SECURE YOUR PROJECT IN MINUTES
What is covered?
Contract works (temporary and permanent)
Site materials (including those in transit or temporary storage)
Construction equipment
Legal defense costs for third-party claims
Claims during defects liability/maintenance periods
What is NOT covered?
Wear and tear or corrosion
Failures due to design errors (Covered under a separate policy)
Poor workmanship
Contractual penalties or delays in project completion
War, terrorism, and nuclear risks
Existing structures
Employee injury (Covered under a separate policy)
Short Term Once Off
Provides comprehensive cover for a specific project that your company undertakes over a specified period. Plant All Risks is not available for this type of policy.
Annual Cover Long Term
Provides comprehensive cover for all projects that your company undertakes over the 12 month period. Under this policy you can also get Plant All Risk cover for your own Plant and the Plant that you Hire-in for the duration of the cover.
This policy is more economical than a series of once-off policies, particularly if awarded small contracts that are below the once-off minimum premium. Further, it also provides seamless cover for all your projects over the period, without having to deal with constant admin.
Who Needs This Cover?
Any party involved in a construction project may need it—this includes main contractors, subcontractors, project owners, and developers. It is especially essential for those contractually responsible for the site and materials.
Frequently Asked Questions
What happens if the contractor fails to perform?
If the Contractor defaults, or fails to honour their obligations, the Owner/Employer may call on the Performance Guarantee in order to complete the Contract. The Insurer then pays the Employer the agreed-upon guarantee amount so they can find a new Contractor to complete the project. In most cases, the Insurer will hold the Contractor liable and will expect reimbursement of the amount paid.
What documents should I have prepared for the application
- Company profile (including an organogram and copies of the current and previous contracts)
- Two years’ financial statements and three months’ bank statements
- Letter of appointment
- Contract information
- Guarantee wording requirements
- Company registration documentation
- Copies of all members’ identity documents and income tax numbers
- Copy of letterhead
- Tax clearance certificates
- CIDB certificate
What will the guarantor look at when assessing my application?
All applications are subject to a thorough analysis to establish the Contractor’s risk profile. This will include an assessment of the Contractors’ financial standing and their resource capabilities to fulfill the Contract obligations.
For Corporate Clients, emphasis is placed on:
- the financial standing of the Contractor
- the company structure and shareholding
- the Contract information
- the Guarantee wording requirements
- the securities available
Does the policy cover subcontractors?
Yes, subcontractors can be covered if they’re declared under the policy. It’s important to include all parties involved in the works at the time of policy inception.
Does CAR insurance include liability for injuries to workers?
No, CAR covers third-party injuries or damage.
What happens if the project duration changes?
You must notify your broker or insurer as soon as the project is extended or delayed. Additional premiums may apply for the extended period.
What Could Trigger A Claim?
Liquidation of the contractor
Liquidation of the contractor’s business is one of the most common reasons for a guarantee to be called up. Liquidation automatically places the contractor in default of the contract and will thus trigger a claim for the performance guarantee.
The employer needs the project to be completed and will have to arrange for a replacement contractor. This causes delays and an inevitable increase in costs.
Contractor expressly refuses to perform its obligation
The Contractor expressly refusing to perform its obligations and perform under the contract gives the Employer the right to terminate immediately and call up on the performance guarantee.
Breach of contract by the contractor
Example:
Eskom Holdings Soc Ltd v Hitachi Power Africa (Pty) Ltd and Another (139/2013) [2013] ZASCA 101 (12 September 2013)
Eskom presented three performance guarantees for payment – a number of disputes had arisen between the parties concerning the performance by Hitachi of its obligations under the construction contract. Eskom alleged that Hitachi had been guilty of material and ongoing breaches of the construction contract. It complained that Hitachi had delayed the completion of the first operating unit at Medupi. It also claimed that in view of the said material breaches, it was entitled to demand payment under the guarantees.